Roblox shares tumbled nearly 14% in after-hours trading Thursday after the gaming platform missed Wall Street revenue targets and issued a third-quarter forecast that fell well short of analyst expectations. The stock dropped to around $41.80 as investors reacted to slowing user growth and a cautious outlook.
User Growth Decelerates Amid Safety Push
Average daily active users reached 123 million in the quarter, up 10% year-over-year but below the 128 million analysts had predicted. Monthly unique payers hit 27 million, a 15% increase from a year ago — but that growth rate has slowed sharply from the 94% surge recorded two quarters earlier. The company attributed the deceleration to mandatory age verification and new parental control tiers, which have reduced the number of younger users able to spend freely. Age verification now covers 57% of users globally, with penetration rates near 80% in Australia and around 70% in the U.S. and U.K.
Algorithm Shift Hits Monetization
Roblox also changed its discovery algorithm to prioritize long-term retention over immediate spending. The shift has hit monetization hardest among users under 13, a key demographic for in-game purchases. The result: bookings — Roblox's preferred measure of spending — grew just 8% year-over-year to $1.6 billion, landing at the low end of the company's own guidance.
Weak Q3 Forecast Weighs on Sentiment
For the current quarter, Roblox expects bookings between $1.58 billion and $1.65 billion, well below the analyst consensus of $1.87 billion. The wide gap suggests the safety measures and algorithm changes will continue to pressure revenue in the near term.
Bright Spots in Profitability
Not all numbers were grim. Adjusted losses of $0.26 per share beat analyst estimates, and free cash flow rose 66% to $294 million. The company has been cutting costs and improving efficiency even as top-line growth slows.
CEO's Long-Term Bet
CEO David Baszucki has set a goal of capturing 10% of the global gaming market, a target that would require massive expansion beyond Roblox's current base. Meanwhile, regulators are tightening oversight: the European Union is closing a VPN age verification loophole that had allowed minors to bypass similar checks, which could further constrain user growth in key markets.
The company now faces the challenge of balancing safety and retention with the need to reignite spending growth — a tension that will be tested when Roblox reports third-quarter results in October.
